Ghana’s fiscal outlook continues to show signs of improvement as the World Bank projects the country’s fiscal deficit to reach 4.2% of GDP by the end of 2024. This marks significant progress compared to previous years thus 3.5% and 11.0% in 2023 and 2022 respectively, reflecting Ghana’s efforts to address macroeconomic imbalances and strengthen fiscal discipline amidst global economic challenges.
As described in its Africa Pulse Report for October 2024, most Sub-Saharan African governments are undergoing fiscal consolidation to ensure public sector sustainability in the context of limited fiscal space and limited access to external borrowing.
The projected 4.2% fiscal deficit by the World Bank indicates that Ghana is making strides toward reducing its fiscal gap. This improvement is largely attributed to ongoing fiscal reforms, enhanced revenue mobilization, and expenditure controls implemented by the government.
Ghana has introduced a series of measures aimed at fiscal consolidation, including improving tax collection, curbing wasteful spending, and focusing on sustainable debt management. The government’s plan to streamline public sector spending and boost revenue generation through initiatives such as the e-levy and property tax reforms has contributed to the narrowing of the fiscal deficit.
Reducing the fiscal deficit is critical for Ghana’s debt sustainability strategy, as the country has been managing significant public debt levels. By controlling the fiscal deficit, the government hopes to reduce borrowing needs and ensure more sustainable debt servicing in the long term.
Ghana is not alone in its effort to improve fiscal balances. The World Bank’s report indicates that several other countries in Sub-Saharan Africa are also making progress in narrowing their fiscal deficits as part of post-pandemic recovery measures.
These improvements are critical for building economic resilience amidst global challenges such as rising interest rates, inflation, and geopolitical tensions. It further speculates that the African region’s median fiscal deficit is projected to decline from 3.9% of GDP in 2023 to 3.3% in 2024. It is set to further decline to 2.9% of GDP in 2025/2026.
A more balanced fiscal position will likely improve investor confidence and contribute to macroeconomic stability, creating a favorable environment for economic growth. The government expects that sustained improvements in fiscal management will help stabilize inflation and provide room for critical investments in infrastructure, health, and education.
Despite the positive fiscal outlook, Ghana still faces risks from external factors such as fluctuating commodity prices, the strength of the US dollar, and potential global recession risks. These could impact revenue inflows and create pressure on public finances. Ghana’s overall public debt remains a concern, and maintaining fiscal discipline will be crucial for the government to balance spending with debt obligations.
